FIELD OF THE INVENTION
This invention relates to a new method for meeting the United States Internal Revenue Service's (IRS) reporting requirements for gaming machine devices such as slot machines and video poker machines.
The IRS requires gaming establishments and casinos to report all payouts, also called jackpots, to players equal to or greater than a specified amount (currently $1,200) on IRS Form W2-G. For the purposes of this application, a payout in excess of the IRS reporting threshold is referred to as a jackpot. The casino is required to obtain the player's Taxpayer Identification Number and prepare a W2-G Form for each and every payout that meets the criterion defined above. Thus, each time a player receives $1,200 or more on a jackpot, the casino must stop play and then issue a W2-G Form. The IRS uses the W2-G Form to ensure that it collects taxes on jackpots. However, the IRS allows players to offset their winnings with documented losses. Typically this results in the taxpayer having to obtain proof of the losses incurred during the year, a cumbersome and risky project.
The IRS has used this procedure for many years because there was no technology available to capture the information in any other manner.
The current reporting procedure has proven to be very cumbersome particularly for slot machines recently introduced which accept up to $500 tokens. A player can play up to two of these tokens at a time. Any payout that exceeds two tokens currently requires a W2-G Form. Payouts of this size are very common. Each time the slot machine exceeds the IRS determined threshold, the slot machine is automatically "locked up" and cannot be played until an attendant prepares a W2-G Form and uses a key to clear the slot machine and make it ready to play again. This is a very tedious process which can result in literally hundreds of W2-G Forms being prepared and issued over several days. W2-G Form preparation is manual, and could be subject to error. It takes approximately 5 minutes to prepare a single W2-G Form.
Further, since the W2-G Form is prepared after each jackpot the W2-G Forms do not reflect any of the subsequent losses of the player of the jackpot winnings. Thus, the accumulated W2-G Forms grossly overstate the actual winnings of a player. For example, if a player plays $100.00 and wins a jackpot of $10,000.00 a W2-G Form is issued for $10,000.00. If the player subsequently plays all $10,000.00 and loses it all, the W2-G Form still shows $10,000.00 of reportable income.